Markets continue dive over nuclear disaster worries

The Nikkei plummeted more than 14 percent Tuesday as Japanese leaders tried to calm jittery markets. Investors fear the knock-on effects of the worsening nuclear crisis, as the world's third largest economy reels after Friday's quake and tsunami.

REUTERS - Japanese leaders tried to calm panicky financial markets on Tuesday as a deepening nuclear power crisis looked certain to increase the toll on an economy already convulsing from the impact of Friday's earthquake and tsunami.

Tokyo's stock market plunged more than 14 percent as the stricken Fukushima nuclear power plant was hit by two explosions and a grim-faced Prime Minister Naoto Kan warned the nation that radioactivity levels had become "significantly" higher.

Japan's quake-stricken Fukushima Daiichi nuclear power plant.

Even before Tuesday's dramatic events, economists had estimated that recovery and reconstruction costs would reach at least $180 billion, or 3 percent of the economic output of the world's third-biggest economy. Others suggested the cost could amount to 5 percent of output.

In the face of the country's biggest crisis since World War II, Japanese leaders urged calm.

"Japan's production and the economic power have not fallen. I think the market confusion will calm down in a short time," Economics Minister Kaoru Yosano said at a press conference.

Finance Minister Yoshihiko Noda said the market's fall was the response to "temporary factors".

The prime minister called for those within 30 km (18 miles) of the facility north of Tokyo to remain indoors, underscoring the worsening of Japan's nuclear crisis, the world's most serious since the Chernobyl disaster in Ukraine in 1986.

"There has been a fire at the No. 4 reactor and radiation levels in the surrounding area have heightened significantly. The possibility of further radioactive leakage is heightening," Kan said in an address to the nation.

"We are making every effort to prevent the leak from spreading. I know that people are very worried but I would like to ask you to act calmly."

Still, financial markets reflected a mounting fear about the radiation risk in a country already reeling from the quake and tsunami.

The Fukushima nuclear power plant at the centre of the crisis, operated by Asia's biggest utility Tokyo Electric Power Co , is 240 km (150 miles) north of Tokyo, the political and commercial heart of the country.

TEPCO shares have hardly traded as sell orders flooded the market. But at the close of trading on Tuesday, it was down 42 percent from its Friday close.

Markets tumble

The Nikkei fell as much as 14 percent at one stage, before closing down 10.5 percent, its biggest percentage fall since October 2008 during the height of the financial crisis.

At the lows of the day, the market had lost a fifth of its value since Friday.

In pictures: Japan quake

The carnage in Miyagi prefecture, where authorities believe more that 10,000 may have been killed. (Photo: AFP)

Hours after the first quake, presenters on Japanese television were still wearing hard hats. (Photo via Twitter)

Vehicles ready to be loaded onto container ships were washed through the town of Hitachinaka by the huge tsunami wave.

A violent 8.9-magnitude earthquake struck the north-eastern coast of Japan on Friday, triggering a tsunami that devastated much of the coastline. (Photo: AFP)

In the city of Fukushima, 80 km away from the nuclear power plants, residents have been stocking up and petrol stations are already running out of supplies. (Photo: AFP)

"All focus is on the nuclear crisis. In the situation where the crisis appears to be worsening, foreign investors, domestic fund operators are pulling out from Japanese shares," Hideyuki Ishiguro, a supervisor at Okasan Securities in Tokyo, said.

The Bank of Japan stepped in to keep the banking system stable for a second day, offering $98 billion of cash if needed. It lined up a record $183 billion in same-day funds on Monday and doubled an asset-buying scheme to support prices.

Still, the economic shocks look set to deepen. A fifth of nuclear power generation capacity is down and TEPCO plans rolling blackouts.

Car makers, shipbuilders and technology companies worldwide were scrambling to secure suppliers after the disaster shut a swathe of factories in Japan, disrupting the global supply chain.

Prices for key technology components spiked and global supply disruptions were expected to last for months. Research firm IHS iSuppli said the disaster could result in significant shortages of some electronic parts and lead to big price hikes.

Japan accounts for one-fifth of the world's semiconductor production, including about 40 percent of flash memory chips used in everything from smartphones, tablets to computers.

"While there are few reports of actual damage at electronic production facilities, impacts on the transportation and power infrastructure will result in disruptions of supply, resulting in the short supply and rising prices," iSuppli said.

Global impact

Ports handling as much as 7 percent of the country's industrial output were damaged in the quake and tsunami, affecting deliveries of oil and gas, container shipments, and cars, among others.

Tokyo and all ports south of the capital were operating normally after briefly shutting following the quake.

After the news of higher radiation levels, Air China said it had cancelled flights from Beijing and Shanghai to Tokyo.

Tokyo travel agents reported a rising number of queries from foreigners seeking to leave the country, although the capital's Narita airport said there had not been a surge in passengers traffic.

The nuclear power crisis has had a ripple affect globally.

Germany suspended an agreement to extend the life of its nuclear power stations, Switzerland put on hold some approvals for nuclear power plants, and Taiwan's state-run Taipower said it was studying plans to cut nuclear power output.

In the United States, the White House said that President Barack Obama remained committed to keeping nuclear as part of the U.S. energy mix.

But analysts predicted that a $10 billion nuclear plant expansion by NRG Energy Inc in South Texas may now fail to get government loan support.